Schrade Company bought a machine for $138,000 cash. The estimated useful life wa
ID: 2497907 • Letter: S
Question
Schrade Company bought a machine for $138,000 cash. The estimated useful life was four years, and the estimated residual value was $5,000. Assume that the estimated useful life in productive units is 140,000. Units actually produced were 63,000 in year 1 and 65,000 in year 2.
Required 1. Determine the appropriate amounts to complete the following schedule. (Round your answers to the nearest dollar amount. Do not round intermediate calculations.) Depreciation Expense for Net Book Value at the End o Year 1 Year 1 Method of Depreciation Straight-line Units-of-production Double-declining-balance Year 2 Year 2 20 2.a Which method would result in the lowest EPS for year 1? Straight-ine Units-of-production Double-declining-balance 2.b Which method would result in the lowest EPS for year 2? Straight-line Units-of-production Double-declining-balance 21 3. Which method would result in the highest amount of cash outflows in year 1? 1? Straight-line Units-of-production Double-declining-balanceExplanation / Answer
1)Depreciable base =cost -salvage
= 138000 - 5000 = 133000
Depreciation per unit = 133000 / 140000 = $ .95 per unit
Deprciation per year = 133000/ 4 = 33250 per year
Depreciation rate = 2 / useful life = 2 /4 = .50 or 50%
2a)Double declining method -as it has highest depreciation leading to lowest net income and EPS
2b)unit of production
3)Double declining method
4)a - Decrease - Investing - purchase - $ 138,000
b)Increase -operating - $ 33250
Depreciation Book value at end Method of depreciation year1 year2 year1 year2 Straight line 33250 33250 138000-33250= 104750 104750-33250=71500 Unit of production 63000*.95= 59850 65000*.95= 61750 138000-59850 = 78150 78150-61750 = 16400 DDB 138000*.5 = 69000 69000*.5= 34500 138000-69000= 69000 69000-34500=34500Related Questions
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